IRS K1 matching

[kathyc2]

Did IRS ever get the K-1 matching operational? I have a situation where client received 2K interest from trust, but K1 has not been issued yet. If I just put the interest income on B instead of on E will it cause problems?

Of course if the K1 shows differently when issued we will need to amend. The best answer would be to extend until K1 received, but client is adamant about not extending.

[Burke]

Interest would not go on E. If you have K-1 input worksheet, and you know it is interest, you could put it on there and let it flow through to B. BUT, I would not do it at all until the K-1 is received, if it were me. 4868 would be incorrect if you filed extension and showed liability without all the information at hand. He could always mail in a 4868 but that would be his problem, not yours.

[Rapid Robert]

4868 would be incorrect if you filed extension and showed liability without all the information at hand.

Disagree with that. Printed directly on Form 4868, it asks only this: "Estimate of total tax liability for 2016". How can an estimate be "incorrect" if it is based on a reasonable estimates? Plus, it's not even signed.

In extreme situations, the IRS might call an extension invalid for purposes of the FTF penalty if the estimated amount paid is not reasonable, but that would still not make filing the 4868 wrong in any way.

[kathyc2]

Interest would not go on E. If you have K-1 input worksheet, and you know it is interest, you could put it on there and let it flow through to B. BUT, I would not do it at all until the K-1 is received, if it were me. 4868 would be incorrect if you filed extension and showed liability without all the information at hand. He could always mail in a 4868 but that would be his problem, not yours.

Yes, of course, the interest income will show on B regardless. But if I don't have K-1 I won't put it on E so page 2 shows that I'm reporting on trust. IOW, there won't be an E page 2 w/ trust EIN. Basically asking if anyone knows if they have the K1 matching working that if a K1 was issued and the 1040 does not show the EIN of trust will a notice be automatically generated?

[Burke]

I doubt it. Assuming he received distributions and the interest will actually flow through to him, the EIN won't appear on the Sche B anyway. If there is no other income from the trust, nothing will show up on the Sche E. That's not unusual. And to be honest, I have never had a CP2000 for non-matching K-1 items, although I heard they were going to be matching them quite some time ago. I still wouldn't do it without the K-1. Trusts are required to have K-1's issued by 4/18/17. I suppose if the trust files an extension, it could be later.

[Roland Slugg]

I will try to answer the Qs you asked in the OP:

Did IRS ever get the K-1 matching operational?

I've never seen a CP2000 or other letter based on a K-1 matching issue. My personal belief is that the IRS does not have an effective K-1 matching program and only does K-1 matching when auditing a T/P's return. (Btw, I also suspect the IRS does not have a matching program set up for form 1099-S, either.)

Client received 2K interest from trust, but K1 has not been issued yet. If I just put the interest income on B instead of on E will it cause problems?

First of all, the interest belongs on Schedule B, not Schedule E. If you or your client knows the exact amount of interest, what problems could possibly arise? If the amount is a close estimate, how far off could his tax possibly be?

Of course if the K1 shows differently when issued we will need to amend.

Absolutely not true! A taxpayer has no mandated requirement to file an amended return, even if he discovers errors on his original return. He may wish to file an amended return if he, (A) overpaid his tax and can get a refund, or (B) underpaid his tax and wants to pay the additional tax due and stop P&I from accruing. Would you advise the T/P to file an amended return if the interest was off by, say, $50, and the tax underpaid by $7 or $8?

The best answer would be to extend until K1 received, but client is adamant about not extending.

There is another option: File F-8082 with the return, reporting the interest as close as the T/P can guestimate the amount. If the client is insisting on filing his return by April 18th, that's what I would do.

[EA_TAX]

Thank you all for the information in this thread, I have a similar situation:
I have a client with a CRUT trust, who has not received his Schedule K-1, instead he received a letter 4/10/17 from the Trust stating the Schedule K-1 will be late and that he should file an extension.
The client would prefer to file timely as well. The client received the distribution check in March 2017, therefore he's confirmed the amount for Schedule K-1 line 4.
I did not know about Form F-8082 until I searched and found this thread posted.
I just read the form and instructions and plan to recommend that if he wants to file timely, we'll use this form to notify the IRS that he did not receive a Schedule K-1.

Thank you. Any other comments are welcome

EA_TAX, NY

[spanel]

FWIW I have seen several CP2000's with K/1's on them. I even had to do some work to fix a fraudulently filed 1120S with my clients ssn on it.

Chris